Governance

I'm sure I'm not the only one who uses my mobile phone for almost everything but to make a call. Thanks to technological advances and the explosion of social media, we text, tweet or do Facebook posts on our devices. But beyond mere communications tools, mobile phones are also crucial for fostering economic activity and development. And I don't mean just in the U.S. and rich countries, but in developing countries.

In practice, theory is something else. I've already heard variants of this expression in several countries and languages. Very often from people referring to the gap between abstract, generic principles and the implementation of projects and policies.

Whether it is in the U.S. presidential election campaign or as a result of the debt crisis in Europe, people on both sides of the Atlantic are debating the role of the state. Do we need more government or less of it? Do we want more public services provided by the state and funded with taxpayers’ money? Or are we better off with the private sector and nongovernmental organizations (NGOs) doing the job?

Gross Domestic Product, better known as GDP, is the market value of all final goods and services produced within a country in a given period. That's why GDP per capita is widely used as a summary indicator of living standards in a country. No wonder we keep our eyes closely on its evolution and compare its levels among countries.

From hedge funds to mortgage-backed securities, unregulated and risky activities have fallen out of favor since the Lehman Brothers debacle. Aggressive, casino-type behaviors and obscure transactions definitely played an important role in the run up to the financial crisis of 2008. But are all financial activities that operate outside the regular banking system bad?

Drug trafficking is nothing new. But with the current levels of violence we are seeing, its effects on society and economic activity are staggering. From the suffering of victims, to increasing levels of corruption and the weakening of institutions, drug trafficking is not only a criminal problem—it is an urgent development issue which needs to be tackled.

Imagine a low-income country in the developing world suddenly discovering a large endowment of natural resources within its borders. Perhaps a large oil reserve is found just offshore, or a deposit of valuable natural minerals is uncovered just below the earth’s surface. Surely, such a discovery would be a blessing, as it would expand the country’s total stock of capital.

The state of the global economy is now more troubled than what most pundits had predicted. The great recession of 2007-09 has left permanent scars and the global recovery has lost steam. In the industrialized world, the Eurozone is struggling to save its common currency and avert an even larger debt crisis. Across the Atlantic, although things are looking slightly better, the United States still faces damaged household balance sheets, depressed consumption, and persistent unemployment. In the developing world, the remarkable role that emerging markets have played as alternate engines of global growth is no longer certain. And this is truly worrisome because in the years that followed the recession, developing countries came to the global economy’s partial rescue, helping advanced economies from slipping into an even deeper recession.

In 2010 and 2011, developing countries grew 7.3 and 6 percent respectively, compared to the 3 and 1.6 percent growth of high-income countries, according to the World Bank’s latest Global Economic Prospects. Nevertheless, growth in several major developing countries like Brazil, China and India is significantly slower than earlier in the recovery, mainly reflecting a tightening of monetary policy to combat rising inflationary pressures but also the low-growth path in advanced economies. As a result, developing countries are now expected to grow only 5.4 percent this year.

Last week’s State of the Union underscored the debate surrounding public spending as a measure to stimulate economic growth. President Barrack Obama argued that to “win the future” the US needs to make significant public expenditures to update the country’s infrastructure, health, and educational systems. The opposite view is that economic growth can only occur through decreased public spending and private sector growth.

Such varied opinions on public expenditures do not exist in the US alone—the debate is global. From the US to the UK, from Europe to Africa, from Latin America to Southeast Asia, to spend or not to spend is a question faced everywhere.

Beyond the epicenter of the economic crisis—the US and Western Europe—public spending has had an indeterminate effect on